(Bloomberg) Oil fell sharply as a new Covid-19 strain raised concerns about the outlook for demand and sent global markets spiraling.Futures in New York tumbled toward $73 a barrel and benchmark Brent shed as much as 6%, the most since July. The emergence of the new strain has seen several nations curb travel from South Africa and some neighboring countries and a World Health Organization Panel is set to consider whether it is a variant of concern. Global markets sold off heavily, as traders fled to haven assets.
“The only thing we can conclude definitely is that market confidence is fragile,” said Paul Horsnell, head of commodities research at Standard Chartered. “The Friday after Thanksgiving, with all markets down and just before a WHO announcement, probably isn’t the time to be brave.”
The drop comes ahead of a key OPEC+ meeting to decide production policy for January. The group has been under pressure from the U.S. and other consuming nations, who tapped strategic stockpiles to tame rising energy prices this week. The group has also been accused of creating “artificial tightness” by the International Energy Agency.
West Texas Intermediate for January fell as much as 7.4% to $72.60 a barrel from Wednesday’s close and was at $73.12 at 11:26 a.m. London time.
There was no settlement Thursday due to the Thanksgiving holiday and all transactions will be booked Friday.
The U.S. benchmark fell below its 100-day moving average for the first time since September.
Brent for January settlement tumbled as much as 6% to $77.28 a barrel on the ICE Futures Europe exchange.
The weakness Friday wasn’t just confined to headline prices. In Europe, profits from turning crude into diesel plunged to their lowest in several weeks. In the U.S., a key gauge of market tightness fell sharply.
OPEC+, which has been restoring 400,000 barrels a day of supply to the market each month, will have to consider internal projections that the reserves release will exacerbate a surplus it’s forecasting for early next year. Those figures were released before the emergence of the latest variant.
Other key news:
China’s ambiguity on whether it will join the U.S.-led coordinated release of oil reserves is aimed at a domestic audience to show Beijing isn’t following Washington, according to government officials involved in the discussions.
Here’s what we know about the new Covid-19 variant that’s hitting markets.
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